Molson Coors Brewing Company (NYSE:TAP) is focused on boosting investors’ sentiments through several growth initiatives and shareholder-friendly moves. In an effort to boost shareholder value, the company announced a 39% increase in its quarterly dividend, taking it from 41 cents a share to 57 cents. The raised dividend is payable on Sep 13, 2019 to shareholders of record as on Aug 30, 2019.
In addition, Molson Coors Canada Inc., its Canadian subsidiary, declared a quarterly dividend of C$0.74, which is equivalent to the parent company’s raised dividend rate. This dividend is also payable on Sep 13, 2019 to shareholders of record as on Aug 30, 2019.
We appreciate Molson Coors’ efforts to consistently enhance long-term shareholder value. Markedly, dividend hikes not only enhance shareholder returns but also raise the market value of the stock. Through this strategy, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it.
Notably, the company has reduced debt by nearly $2 billion since the closing of the MillerCoors transaction. In 2019, the company expects to deliver underlying free cash flow of around $1.4 billion (plus or minus 10%). It plans to reinstitute a dividend payout target of 20-25% of annual trailing underlying EBITDA upon achieving 3.75x leverage, which is likely to occur by the second half of 2019 and ongoing thereafter.
The company has undertaken restructuring initiatives to reduce overhead costs and boost profitability. These initiatives included the closure of underperforming breweries, improving efficiencies in finance, administration and human resources, as well as reducing labor and general overhead costs. Moreover, it has been focusing to improve its supply-chain network and build on efficiencies across the business to generate additional resources and invest in brand building and innovation.
Progressing on these lines, Molson Coors anticipates to generate cost savings of roughly $205 million in 2019, remaining on track with its targeted total cost savings of $700 million for the three-year period from 2017-2019. This $700 million cost-saving target is $150 million ahead of its initial goal of $550 million under the program. Further, it plans to achieve cost savings of another $450 million between 2020 and 2022, driven by procurement and supply chain, including brewery optimization.
What’s Weighing on Molson Coors?
This Zacks Rank #4 (Sell) stock has lost approximately 11% in the past year compared with the industry’s growth of 2.3%. This softness clearly reflects the ongoing turmoil in the alcohol space resulting from consumers shifting to healthy drinks and wines, which is particularly hitting the beer makers hard. This resulted in weak beer volume in the United States for the company. Moreover, it expects further contraction of the U.S. beer industry volumes.
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